POST WRITTEN BY

Ralph DiBugnara

President of Home Qualified

April 7th, 2020

 

 

Recession Doesn’t Mean Housing Recession

In the last five recessions only two of them have produced a down real estate market and 1991 and 2008 were both recessions caused by housing crisis. In 1980, 1981 & 2001 the real estate market was up over 5%. This will be more like 2001 than 2008.  In 2001 most investors biggest losses came in stock market because of internet bubble. Historically Rental Properties have performed well during recession.  Average rents in the top 50 markets have risen 22.3% since 2008. To put this into context, a typical household spent just 29.7% of their income on rent in 2006 pre-crash. Since the economic crisis that number has increased on average to 34%. Stock Market uncertainty and Volatility have historically pushed investors into real estate where there is less variables & more of a secure long-term investment. I believe you will see investors who have left real estate because of compressed margins over last few years, come back and replaced inexperienced investors who were over leveraged and not as seasoned.

These are the facts of what 2020 will likely look like for Real Estate

Interest Rates will remain low as the fed continues to buy mortgage back securities in the US and from Under Pressure Foreign Countries who own significant amounts. This will keep rates low for the foreseeable future. Investors have lost aggressive financing options, and this will cause some under pressure sales over the rest of the year. When properties are financed, not selling as fast & currently in danger of not collecting rents you will see some financially strapped sellers. This historically has shown more inventory coming to the market at discount prices. China is our only example as far as a housing market dealing with this crisis. Over the last quarter housing sales have decreased between 30 & 50% in that country mostly because of quarantine. I can only expect the next quarter to look the same here. This crisis will inevitably change behaviors. More people will work & shop from home. Which could be positive for real estate. It could mean less commuting and more of an emphasis on homes that provide a comfortable option to work from home. It’s a trend to stay ahead of now.